March 2010 | Fierce competition on the Tasman and South Pacific routes has led Air New Zealand (ANZ) to radically overhaul its short-haul fares and service offerings. The airline has decided to remove business-class seats from its A320 aircraft that fly from New Zealand to Australia and the Pacific islands, increasing capacity by an extra 19 seats to 171 seats. Instead, the single-class A320s will have four options of service, priced accordingly.

A ‘Seat’ option allows one carry-on bag of 7kg, tea, coffee and water and access to some entertainment options but no new release entertainment. ‘Seat + Bag’ allows one carry-on bag and one checked bag, tea, coffee and water and some entertainment. ‘The Works’ offers carry-on and checked bag, meal and drinks and a seat request, and ‘Works Deluxe’ allows two priority bags, a carry-on bag, meal and drinks, a seat request, a guaranteed empty seat next to the passenger, premium check in, lounge access and better entertainment options. ANZ said a Works Deluxe airfare would be around NZD500 (EUR270, USD360) cheaper than a current business class fare and the seat-only option would be “in exactly the same place” as budget airlines. The airline is also introducing automated check-in procedures similar to those currently used on domestic flights, in which a RFID chip can be used to check in.

ANZ also created a ‘Pick ‘n Mix’ fare, which allows passengers to choose a different product on each stage of their journey. For example, travelers that are heading away for a weekend shopping may want to choose to fly there with the ‘Seat’ option (carry-on bag only) and fly home with the ‘Seat + Bag’ option. For a family traveling, parents may book ‘The Works’ and the kids get booked as ‘Seat’. ANZ says it asked what passengers really wanted when it came to travelling around the Tasman & Pacific and that the reponse was ‘more choice’. The airline launched a ‘Choice is a Wonderful Thing’ campaign to inform the public about its new offer.

The major reason for the change is that ANZ is seeing a significant drop in business-class travelers out of Wellington and Christchurch to the point where just one of the eight seats is being sold on average per flight. The changes start with Christchurch to Sydney in August 2010 and will be rolled out to other routes in November. Business class however will still be available on aircraft that fly at prime times to and from Auckland for travelers connecting with ANZ’s long haul services, as well as on longer shorthaul routes (such as Auckland to Perth and Tahiti).

Raymond Kollau is founder of AirlineTrends and uses his extensive experience in analyzing industry and consumer trends to translate and apply these trends to airline passenger experience innovation. Raymond frequently presents and facilitates trend sessions and workshops at airlines and industry suppliers around the globe.